Deposit Rs 250 crore as per SAT order: Supreme Court to RIL

The Supreme Court on Thursday asked Reliance Industries (RIL) to deposit Rs 250 crore, which is 50% of the disgorged amount of Rs 447.27 crore, as ordered by the Securities Appellate Tribunal in a case related to the sale of Reliance Petroleum (RPL) shares by RIL in November 2007.

A Bench led by Justice DY Chandrachud, while admitting RIL’s appeal against the SAT order, said the company shall deposit Rs 250 crore within four weeks in the Investors’ Protection Fund in compliance with an order of the Securities and Exchange Board of India (Sebi), subject to the final result of the appeal. “There shall be a stay on the recovery of the balance, inclusive of interest, pending the appeal,” the apex court said in its interim order, while noting that RIL had complied with Sebi’s order for debarment from dealing in equity derivatives for one year.

While senior counsel Harish Salve appeared for RIL, Attorney General for India KK Venugopal and senior counsel Arvind Datar represented Sebi.

The SAT in a 2:1 majority order had on November 5 dismissed RIL’s appeal against the Sebi’s March 24, 2017, order that claimed fraudulent trading in the futures and options segment of the securities of RIL’s erstwhile listed subsidiary RPL, which was merged with the former in 2009, in November 2007.

After finding that RIL violated the Prohibition of Fraudulent and Unfair Trade Practices, making unlawful gains while selling its 4.1% stake in RPL, Sebi had banned RIL from equity derivatives trading for a year and had also directed RIL to disgorge Rs 447 crore, along with simple interest of 12% per annum since November 29, 2007, till payment.

Sebi had found that RIL and 12 of its promoter group entities violated provisions of Section 12A of the SEBI Act, 1992, and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the securities market) Regulations, 2003.

The Sebi order was later upheld by SAT.

In March 2007, RIL sold 4.1% of its stake in RPL. Sebi had said front entities triggered a sharp fall in Reliance Petroleum shares and profited from short positions. The market regulator alleged that the Ambani firm made illegal gains of Rs 60.28 per share on 7.42 crore shares.

The SAT had rejected RIL’s stand that the disgorgement was a punishment/penalty, while powers granted to Sebi under Section 11B of SEBI Act are remedial in nature, thus no order for disgorgement could have been passed.

“In the Securities Laws (Amendment) Act, 2014, effected from July 18, 2013, it is clearly stated that power of disgorgement, an amount equivalent to the wrongful gain made or loss averted by such contravention was always with Sebi,” SAT had said, adding that it is an equitable remedy and not a penal action.